Profits are up more than 50 percent at Florida’s largest private property
insurer, but a business practice characterized as “abusive and inappropriate” by
a state advocate is infuriating homeowners like Michael and Barbara Wyman.

The Wymans said Universal Property and Casualty Insurance Co. of Fort Lauderdale
seemed happy to take their premiums since 2011. But when they experienced more
than $10,000 in water damage at their Delray Beach home, the couple said, they
were stunned that Universal voided their policy instead of paying the claim.

The justification: An old tax lien of less than $600 satisfied years before in
New York. The Wymans said they paid off that lien shortly after becoming aware
of it in early 2009 and forgot about it. But as they wondered what possible
bearing that could have on their Florida claim, they said the company insisted
because they hadn’t disclosed it in their insurance application, the policy was
no good and their claim would not be paid.

In a statement, Universal declined to discuss individual customer cases but
cited a “a long track record of providing competitively priced coverage” and
prompt payment of claims.

“We believe our underwriting process not only complies with the Insurance Code
but also is a fair and reasonable process that enables us to make needed
coverage available to many Floridians,” the statement said.

Universal, the state’s largest home insurer after state-run Citizens with more
than 550,000 customers, saw parent firm Universal Insurance Holdings Inc. report
net income rocketed up 50 percent to more than $30 million in 2012. The company
has more policyholders in Palm Beach than any other county, 66,373, followed
closely by Broward, according to records through Dec. 31.

President and CEO Sean Downes said earnings results “reflect the successful
execution of our business plan leading to better underwriting margins compared
to a year ago.”

A contract for Downes is set to pay him $2 million a year plus bonuses,
according to published reports — 3 percent of the company’s net income up to $5
million, 4 percent of net income after that, and 1.5 million shares of stock
recently valued at $4.59 a share.

Complaints about denied claims, price increases and dropped policies by
Florida’s private insurers are getting comparatively little attention in
Tallahassee, where state legislators have largely focused instead on raising
rates and reducing coverage at state-run Citizens to drive more customers to
private carriers.

But the state’s Office of Insurance Regulation has been aware of Universal’s
handling of such cases for months.

Florida’s insurance consumer advocate Robin Westcott called for a formal
investigation by regulators in late October into what she described as an
“unfair trade practice.”

It’s one thing to check out a customer’s credit history and choose not to take
premiums at sign-up, Westcott said. It’s another to collect premiums for years
and bring up a tax lien or bankruptcy when a customer files a substantial claim,
she said.

“I have met with representatives from this company and expressed my deep concern
about this business practice,” Westcott told The Palm Beach Post. “An insurer is
entitled to use credit information to underwrite a risk, but using this as a
basis to deny a claim and void coverage is unfair and has had disastrous
consequences for families relying on this coverage.”

Ask Miles Weiss of Parkland about that. He said Universal rescinded his policy
for a similar lien issue after he filed a claim, triggering his mortgage
servicer to bill him for extremely expensive “force placed” coverage that cost
about $11,000 a year. He said he was far worse off than if Universal had simply
refused coverage when he applied.

“I felt like a rug had been pulled out from under me,” Weiss said.

Universal refunded premiums to Weiss and the Wymans but is playing a game
stacked in its favor, said Pat Goins, a public adjuster in Boynton Beach.

A tax lien in another state has no plausible effect on a claim, as he sees it.

“No, it wouldn’t affect your claim, and it’s unconscionable,” said Goins, with
The People’s Choice Public Adjuster LLC. “What I see here is a pattern. If I
have six, seven or eight clients myself with the same problem, this is a
pattern.”

Universal’s position: “The obligation to provide accurate information in support
of his or her request for insurance rests with each applicant.”

Some 730 complaints were filed against Universal in 2012 on matters including
claim denials, delays or policy cancellations, according to the state’s
Department of Financial Services, though its records aren’t specific enough to
show how many dealt specifically with the credit-information issue.

Universal’s complaint to customer ratio for last year was about four times
higher than that of USAA, which covers Florida military families, records show.
Universal said “complaints” to state agencies can include requests for
information and noted that unlike many national carriers, it added 31,000 new
policies in the first nine months of 2012.

The state’s Office of Insurance Regulation is “looking into the specific
allegations received from the Insurance Consumer Advocate and others,”
spokeswoman Amy Bogner said. “The company has stated publicly that it is using
public records searches, not credit reports. Their argument is that some of the
cases involve multiple omissions in the application and that if they had known
of the true facts, the company would not have written the policy.”

Bogner said her office “cannot confirm nor deny the existence of an ongoing
examination or investigation.”

Bogner referred to a
governing statute in state law, which says omissions in applications cannot
be used to void policies except in certain cases, such as that they are
fraudulent or “material,” meaning relevant to the risk assumed by the insurer.

Westcott characterized Universal’s tactics as “ignoring readily available
information to your potential advantage (collecting premium) and using it only
when convenient (denying the claim).”

Universal CEO Downes wrote a letter to the state’s insurance office in November,
obtained in a records request from the Post. Downes said 99.5 percent of the
company’s customers have provided accurate and complete information on
applications. “We are not insensitive to the adverse impact on consumers when
inaccurate statements or omissions result in our decision to rescind coverage,”
Downes said. The company has “chosen to trust our applicants and react only when
that trust is breached,” he wrote.

A half percent of the company’s 550,000 customers would be about 2,750, though
the letter stopped short of specifying how many people saw coverage dropped
because of omissions on their applications that came to light when they filed
claims. A company statement later said that although Universal did not generally
track statistics of this type, its estimated number was probably closer to 200 a
year.

Nothing so far has helped the Wymans, who say they have been forced to pay out
of pocket for a five-figure loss.

“We replaced the floors at our own cost,” Barbara Wyman said. “We’re retired.
That certainly was not in our budget.”

Her husband said it has been a bitter shock.

“It was a horrible experience,” Michael Wyman said. “I felt like I was punched
in the gut.”